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Item 1. Financial Statements

2024-05-21 compared with 2023-11-14 · 539 added, 237 removed, 95 unchanged (89% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

March 31, 2024

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Receivable from escrow account

Income tax receivable

Prepaid expense

Inventories, net

Prepaid expenses and other current assets

Other current assets related to discontinued operations

Total current assets

Other Assets:

Property and equipment, net

Non-current related to discontinued operations

Total Other Assets

LIABILITIES AND SHAREHOLDERS' EQUITY

Equity-method investment

Intangible assets, net

Operating lease right-of-use assets

Finance lease right-of-use assets

Long-term receivable

Note receivable

$ 106,824,000

Liabilities and Stockholders' equity

Current liabilities:

Accounts payable

Accrued liabilities:

Accrued compensation

Accrued expenses and other current liabilities

Current portion of finance lease liabilities

Current portion of operating lease liabilities

Current portion of debt

Current liabilities related to discontinued operations

1 unchanged sentence

Long-term liabilities:

Accrued income taxes

Non-current liabilities related to discontinued operations

Finance lease liabilities, net of current portion

Operating lease liabilities, net of current portion

Long-term debt, net

Deferred tax liabilities, net

Total Long-term liabilities

Commitments and Contingencies

Shareholders' Equity:

Commitments and contingencies (Note 12)

Stockholders' equity

Common stock, par value $.01:

Authorized shares - 5,714,000

Issued and outstanding shares - 1,751,000 at September 30, 2023 and 1,797,000 at December 31, 2022, respectively

Issued and outstanding shares - 1,743,000 at March 31, 2024 and December 31, 2023

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

( 1,702,000 )

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

See accompanying notes to condensed consolidated financial statements.

Total stockholders' equity attributable to Lendway, Inc

Equity from noncontrolling interest

Total Stockholders' equity

Total Liabilities and Stockholders' equity

$ 106,824,000

See accompanying notes to the condensed consolidated financial statements.

Lendway, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

Nine Months Ended

Operating Expenses:

Sales and marketing

General and administrative

Total Operating Expenses

Cost of goods sold

Sales, general and administrative expenses

Operating loss

( 1,494,000 )

( 2,983,000 )

( 1,663,000 )

Interest income

Foreign exchange difference, net

Interest expense (income), net

Other expenses, net

Loss from continuing operations before income taxes

( 1,683,000 )

( 2,658,000 )

( 1,608,000 )

Income tax (benefit) expense

1 unchanged sentence

( 1,336,000 )

Income from discontinued operations, net of tax

Net (loss) income including noncontrolling interest

( 1,264,000 )

Net (loss) income attributable to noncontrolling interest

Net (loss) income attributable to Lendway, Inc.

( 1,041,000 )

(Loss) Income from discontinued operations, net of tax

Gain from sale of discontinued operations, net of tax

Net (loss) income per basic and diluted share:

Other comprehensive income (foreign currency translation)

Comprehensive (loss) income attributable to Lendway, Inc.

$ ( 1,038,000 )

Net (loss) income per basic and diluted share attributable to Lendway, Inc.:

Continuing operations

3 unchanged sentences

Basic and diluted

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

Lendway, Inc.

and Subsidaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Additional Paid-In

Balance at December 31, 2022

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Comprehensive

Stockholders'

Noncontrolling

Stockholders'

BALANCE DECEMBER 31, 2023

$ ( 661,000 )

Issuance of common stock, net

Value of stock-based compensation

Balance at March 31, 2023

( 1,041,000 )

Value of stock-based compensation

Balance at June 30, 2023

( 1,041,000 )

Repurchase of common stock

Issuance of common stock, net

Issuance of common stock upon vesting of restricted stock units

Value of stock-based compensation

Balance at September 30, 2023

( 1,264,000 )

Additional Paid-In

Balance at December 31, 2021

Other comprehensive income

Issuance of noncontrolling interests in acquisition

BALANCE MARCH 31, 2024 (Unaudited)

$ ( 1,702,000 )

Issuance of common stock, net

Value of stock-based compensation

Balance at March 31, 2022

BALANCE DECEMBER 31, 2022

$ ( 3,075,000 )

1 unchanged sentence

Value of stock-based compensation

Issuance of common stock upon vesting of restricted stock units

( 1,084,000 )

Balance at June 30, 2022

$ ( 14,143,000 )

Value of stock-based compensation

Issuance of common stock upon vesting of restricted stock units

Balance at September 30, 2022

BALANCE MARCH 31, 2023 (Unaudited)

$ ( 1,427,000 )

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

Lendway, Inc.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30

Three Months Ended

Operating Activities

Income from discontinued operations, net of tax

( 2,422,000 )

( 12,392,000 )

Gain from sale of discontinued operations, net of tax

Net (loss) income

$ ( 1,264,000 )

Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities of continuing operations:

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization

Amortization of deferred financing costs

Changes in allowance for doubtful accounts

Stock-based compensation expense

Changes in operating assets and liabilities:

Receivable from escrow account

Noncash operating lease expense

Deferred income tax (benefit) expense

Increase (decrease) in cash resulting from changes in, net of acquisition:

Accounts receivable, net

( 1,635,000 )

( 3,770,000 )

Income tax receivable

Prepaid expenses and other

Accounts payable

Accrued liabilities

Accrued income taxes

Net cash used in operating activities of continuing operations

Prepaid expenses and other current assets

( 1,037,000 )

( 1,084,000 )

Accounts payable

Accrued compensation

Accrued expenses and other current liabilities

Deferred revenue

Net cash provided by (used in) operating activities of continuing operations

( 3,846,000 )

Net cash provided by operating activities of discontinued operations

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

( 3,846,000 )

Investing Activities

Proceeds from sale of business

Purchases of property and equipment

Net cash provided by investing activities of continuing operations

Net cash used in investing activities of discontinued operations

Net cash provided by (used in) investing activities

Acquisition of Bloomia, net of cash acquired

( 34,178,000 )

Receipts from note receivable

Net cash used in investing activities

( 34,372,000 )

Financing Activities

Proceeds from issuance of common stock, net

Repurchase of common stock, net

Net cash (used in) provided by financing activities

Increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental disclosures for cash flow information:

Cash paid during the period for income taxes

Non-cash financing activity:

Purchase of property and equipment included in accounts payable

Common stock issued for accrued liabilities

See accompanying notes to condensed consolidated financial statements.

Proceeds from long-term debt

Repayments of long-term debt

( 1,650,000 )

Principal payments on finance lease liabilities

Payment of financing costs

Proceeds from issuances of common stock

Net cash provided by financing activities

Effect of exchange rate changes

Net decrease in cash and cash equivalents

( 11,064,000 )

( 3,844,000 )

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental cash flow information

Cash paid for interest

Noncash purchase consideration - Equity issuance of noncontrolling interest

Noncash purchase consideration - Seller notes

See accompanying notes to the condensed consolidated financial statements.

Lendway, Inc.

3 unchanged sentences

Description of Business.

Lendway, Inc., a Delaware corporation (the “Company), is building a scalable non-bank lending business (the “Lending Business”) to purchase existing loans or originate and fund new loans, all of which will be secured by collateral.

On August 4, 2023, the Company changed its name from “Insignia Systems, Inc.” and reincorporated from Minnesota to Delaware.

As part of the name change, the Company’s common stock now trades under the symbol “LDWY” on The Nasdaq Stock Market LLC.

As described in Note 2, on August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s legacy business of providing in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (the “In-Store Marketing Business”) for a price of $3.5 million, subject to escrows and a post-closing adjustment.

Lendway, Inc.

(“the Company”) has evolved into a specialty agricultural (“ag”) and finance company focused on making and managing its ag investments in the United States (“U.S.”) and internationally.

On February 22, 2024, the Company, through its majority-owned U.S.

subsidiary Tulp 24.1, LLC (“Tulp 24.1”), acquired Bloomia B.V.

Subsequent to the purchase of Bloomia, the Company’s primary operations will be that of Bloomia.

Bloomia is a significant producer of fresh cut tulips in the U.S.

with a presence in the Netherlands and South Africa.

As part of consideration for the business combination, the Company issued units of Tulp 24.1 to the continuing CEO of Bloomia, which amounted to 18.6% and is presented as noncontrolling interest in these condensed consolidated financial statements.

The remaining 81.4% equity interest of Tulp 24.1 is owned by the Company and the Company is and maintains control of Tulp 24.1 as its sole managing member.

Refer to Note 3 for further discussion.

The Company has retained its non-bank lending business via its wholly owned subsidiary, Farmland Credit, Inc.

(“FCI”), and FCI’s subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC.

As part of its non-bank lending business, the Company operates FarmlandCredit.com, a non-bank lending business that seeks to purchase existing loans and/or originate and fund new loans domestically.

Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X.

They do not include all information and footnotes required by U.S.

The accompanying unaudited condensed consolidated financial statements of the Company include all wholly and majority owned subsidiaries of the Company.

The operations of Bloomia are included since the date of acquisition.

Entities for which the Company owns an interest, does not consolidate, but exercises significant influence, are accounted for under the equity method of accounting and are included in equity method investments within the condensed consolidated balance sheets.

All intercompany accounts and transactions have been eliminated.

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S.

GAAP for complete financial statements.

However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in the Company’s financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2023 (the Form 10-K).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The accompanying condensed balance sheet as of December 31, 2022 has been derived from the audited balance sheet as of December 31, 2022 contained in the Form 10-K.

The operations of the In-Store Marketing Business are presented as discontinued operations beginning with this Quarterly Report on Form 10-Q for the three months ended September 30, 2023, the period in which the sale of the In-Store Marketing Business met the criteria as discontinued operations.

However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in the Company’s consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024 (the Form 10-K).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included.

The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited balance sheet as of December 31, 2023 contained in the Form 10-K;

however, certain prior period amounts have been reclassified to conform to current period classification.

Reclassifications had no material effect on prior year net income, net income (loss) per share, or stockholders’ equity.

The unaudited condensed consolidated results of operations and comprehensive loss for the three months ended March 31, 2024, are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2024, nor for any other future annual or interim period.

The tulip sales business tends to be seasonal with spring being the strongest sales season.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s legacy business of providing in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (the “In-Store Marketing Business”).

The operations of the In-Store Marketing Business are presented as discontinued operations.

All prior periods presented have been restated to present the In-Store Marketing Business as discontinued operations.

The condensed consolidated financial statements include the accounts of the Company, its subsidiary, Farmland Credit, Inc., a Minnesota corporation (“FCI”), and FCI’s subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC.

Recently Issued Accounting Pronouncements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

ASU 2023 - 07 requires enhanced disclosures about significant segment expenses, includes enhanced interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-07 is to be applied retrospectively to all prior periods presented in the financial statements.

The Company will not early adopt, and is currently assessing the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

ASU 2023 - 09 requires public companies to expand their income tax disclosures with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation.

Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued, and allows for either a prospective or retrospective approach on adoption.

The Company will not early adopt, and is currently assessing the impact of ASU 2023 - 07 on its consolidated financial statements and related disclosures.

Significant Accounting Policies.

Use of Estimates.

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

The key estimates made by management include the determination of fair values in conjunction with the acquisition of our majority interest in Bloomia, and the carrying value of inventories, right-of-use assets and lease liabilities, useful lives for property and equipment and intangible assets, and value of income taxes.

Actual results could differ from these estimates.

Foreign Currency Transactions.

The revenues of the Company and most of its subsidiaries are generated in U.S.

In addition, most of the costs of the Company and most of its subsidiaries are incurred in U.S.

The Company’s management has established that the U.S.

dollar is the primary currency of the economic environment in which the Company and most of its subsidiaries operate.

Thus, the functional currency of the Company and most of its subsidiaries is the U.S.

Transactions and balances that are denominated in currencies that differ from the functional currencies have been remeasured into U.S.

dollars in accordance with principles set forth in Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters .

At each balance sheet date, monetary items denominated in foreign currencies are translated at exchange rates in effect at the balance sheet date, while income and expenses are translated at average exchange rates for the periods presented.

All exchange gains and losses from the remeasurement mentioned above are reflected in the condensed consolidated statement of operations as foreign exchange expenses or income, as appropriate.

For subsidiaries whose functional currency has been determined to be other than the U.S.

dollar, assets and liabilities are translated at year-end exchange rates, and condensed consolidated statement of operations items are translated at average exchange rates prevailing during the year, and equity is translated at blended historical rates.

Resulting translation differences are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.

Accounts Receivable, Net.

Accounts receivable are presented in the balance sheets at their outstanding balances net of the allowance for credit losses.

These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year.

The Company estimates credit losses on accounts receivables in accordance with ASC 326 Financial Instruments - Credit Losses .

The Company measures the allowance for credit losses on trade receivables on a collective (pool) basis when similar risk characteristics exist.

The estimate for allowance for credit losses is based on a historical loss rate for each pool.

Management considers qualitative factors such as change in economic factors, regulatory matters, and industry trends to determine if an allowance should be further adjusted.

At March 31, 2024, the Company had an allowance for doubtful accounts of approximately $ 29,000 .

Raw materials consist primarily of tulip bulbs, including freight and packaging supplies.

Work-in-process consists of tulip stems and bulbs that have rooted.

Inventories are stated at the lower of cost, as determined on the first-in, first-out method, or net realizable value.

Finished goods and work-in-process include the inventory costs of raw materials, direct labor and normal manufacturing overhead.

Abnormal amounts of spoilage are expensed as incurred and not included in overhead.

Property and Equipment, Net.

Property and equipment, net are stated at historical cost, less accumulated depreciation and amortization.

Bushes refer to peony plants, which accumulate planting and development costs that are capitalized into their basis until they become commercially productive, at which point the asset begins depreciating, and future maintenance costs are expensed as incurred.

Planting costs consist primarily of the costs to purchase and plant nursery stock.

Development costs consist of cultivation, pruning, irrigation, labor, spraying and fertilization, and interest costs during the development period.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets.

Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term (including renewals that are reasonably certain to occur) or the estimated useful lives of the improvements.

The estimated useful lives of property and equipment are as follows:

Estimated Useful life

Machinery and equipment

Leasehold improvements

Furniture and fixtures

Long-Lived Assets Impairment Testing .

Long-lived assets, which include property, plant and equipment, finite-lived intangible assets subject to amortization, and right-of-use assets are assessed for impairment whenever events or changes in circumstances such as asset utilization, physical change, legal factors or other matters indicate the carrying value of those assets may not be recoverable from future undiscounted cash flows.

The impairment test involves comparing the carrying amount of each individual asset-group to the forecasted undiscounted future cash flows generated by that asset group.

These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

In the event the carrying amount of the asset exceeds the gross undiscounted future cash flows generated by that asset and the carrying amount is not considered recoverable, an impairment exists.

An impairment loss is measured as the excess of an individual asset group’s carrying amount over its fair value and is recognized in the statement of operations in the period that the impairment occurs.

The reasonableness of the useful lives of the asset and other long-lived assets is regularly evaluated.

During the three months ended March 31, 2024 and 2023, no impairment losses were identified.

Goodwill and Indefinite-lived Assets .

Goodwill results from business combinations and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets.

Annually, or if conditions indicate an additional review is necessary, the Company assesses qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and if it is necessary to perform the quantitative goodwill impairment test.

If the Company performs the quantitative test, it compares the carrying value of the reporting unit to an estimate of the reporting unit’s fair value to identify potential impairment.

The fair value of each reporting unit is estimated using a discounted cash flow model.

Where available, and as appropriate, comparable market multiples also used to corroborate the results of the discounted cash flow models.

In determining the estimated future cash flow, the Company considers and applies certain estimates and judgments, including current and market projected future levels of income based on management’s plans, business trends, prospects and economic conditions and market-participant considerations.

If the estimated fair value of the reporting to unit is less than the carrying value, a goodwill impairment loss is recorded for the difference, up the amount of the total goodwill.

During the three months ended March 31, 2024, no impairment losses were identified.

Further, the Company recognized a trade name associated with the Bloomia acquisition that was determined to be an indefinite-lived intangible asset.

Annually, or if conditions indicate an additional review is necessary, we test indefinite-lived trade names for impairment.

We have the option to first assess qualitative factors to determine whether the fair value of a trade name is “more likely than not” less than its carrying value.

If it is more likely than not that an impairment has occurred, we then perform the quantitative impairment test.

If we perform the quantitative test, the carrying value of the asset is compared to an estimate of its fair value to identify impairment.

The fair value is determined by the relief-from-royalty method, which requires significant judgment.

Actual results may differ from assumed and estimated amounts utilized in the analysis.

If we conclude an impairment exists, the asset's carrying value will be written down to its fair value.

During the three months ended March 31, 2024, no impairment losses were identified.

Equity-Method Investments.

Investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over the investee.

Under the equity method of accounting, the Company records its investments in equity-method investees in the consolidated balance sheets as equity-method investments and its share of investees’ earnings or losses together with other-than-temporary impairments in value, basis differences between the carrying amount and our ownership interest in the underly net assets of the investee, and any gain or loss from the sale of an equity method investment as gain on sale of equity investment in net income of unconsolidated investments in the statement of operations.

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.

If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Investments in equity-method investments and joint ventures of immaterial entities are estimated based upon the overall performance of the entity where financial results are not available on a timely basis.

FASB ASC Topic 820, "Fair Value Measurements and Disclosures," (ASC 820), Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of certain financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other financial working capital items approximate their fair values at March 31, 2024 and December 31, 2023 due to their short-term nature and management’s belief that their carrying amounts approximate the amount for which the assets could be sold or the liabilities could be settled.

The carrying amount of debt approximates fair value due to the debt’s variable market interest rate.

Revenue Recognition.

The Company accounts for revenue in accordance with FASB Topic 606, “Revenue from Contracts with Customers,” (ASC 606), using the following steps:

Identify the contract or contracts, with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to performance obligations in the contract;

Recognize revenue when or as the Company satisfies a performance obligation.

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied;

this occurs with the transfer of control of its tulips.

Revenue is measured as the amount of consideration expected to be received in exchange for transferring products.

Revenue from product sales is governed primarily by customer pricing and related purchase orders (“contracts”) which specify shipping terms and the transaction price.

Contracts are at standalone pricing.

The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied.

This generally occurs with the transfer of control of tulips to the customer and the product is delivered.

The Company expenses the incremental costs of obtaining a contract, if the amortization period is one year or less.

These costs are included in sales and marketing expense in the Condensed Consolidated Statement of Operations.

The following table presents revenue disaggregated by customer, as determined by the operational nature of their industry:

Period ended March 31

For the period ended March 31, 2024, the Company had three customers that account for 10% or more of the total revenues.

These three customers accounted for approximately 47%, 13%, and 11%, respectively for the period ended March 31, 2024.

As of March 31, 2024, approximately $ 3.2 million was due from these three customers.

The loss of a major customer could adversely affect the Company's operating results and financial condition.

Cost of Sales.

Cost of sales consists primarily of costs to procure, sort, pick, cool and transport bulbs.

Additionally, cost of sales includes labor and facility costs related to production operations.

Shipping and Handling.

The Company’s shipping and handling costs include costs incurred with third-party carriers to transport products to customers.

The costs of out-bound freight are included in the cost of goods sold in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

For the period ended March 31, 2024, the costs of out-bound freight were approximately $ 546,000 .

Advertising Costs.

The Company expenses advertising costs as incurred.

These costs are included within sales, general and administrative expenses in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

Total advertising expense was approximately $ 2,000 for the period ended March 31, 2024.

Income Taxes .

The Company uses the liability method to account for income taxes as prescribed by ASC 740.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse.

Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities.

Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law.

In determining the Company’s ability to realize its deferred tax assets, the Company considers any available tax planning strategies that could be implemented.

Under ASC 740 a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized due to the inability to generate sufficient future taxable income of the correct character.

Failure to achieve previously forecasted taxable income could affect the ultimate realization of deferred tax assets and could negatively impact the Company’s effective tax rate on future earnings.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Interest income or expense/penalties attributable to the overpayment or underpayment, respectively, of income taxes is recognized as an element of our provision for income taxes.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.

If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed, and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.

Conversely, the Company records additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.

Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.

Therefore, the actual liability for U.S.

or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Stock Based Compensation .

The Company measures and recognizes compensation expense for all stock-based awards at fair value.

Restricted stock units and awards are valued at the closing market price of the Company’s stock on the date of the grant.

The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options.

The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding several complex and subjective variables.

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

During the three months ended March 31, 2024 and 2023, no stock options or restricted stock were issued by the Company.

The Company recorded total stock-based compensation expense of $ 1,000 and $ 22,000 for the three months ended March 31, 2024 and 2023, respectively.

Net Income (Loss) per Share.

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding and excludes any dilutive effects of stock options and restricted stock units and awards.

Diluted net income (loss) per share gives effect to all diluted potential common shares outstanding during the year.

In determining diluted net income (loss) per share, the Company considers whether the result of the incremental shares would be antidilutive.

During the period ended March 31, 2024, the Company was in a net loss position and the result of the potentially dilutive securities was determined to be antidilutive and therefore, no incremental shares are included in any of the per share calculations.

For the period ended March 31, 2024, options to purchase 1,463 shares of common stock with a weighted average exercise price of $ 15.54 , were outstanding and determined to be antidilutive.

At March 31, 2023 options to purchase 9,175 shares of common stock with a weighted average exercise price of $ 13.95 and 6,248 restricted stock units were outstanding and were determined to be antidilutive.

Weighted average common shares outstanding for the three months ended March 31, 2024 and 2023 were as follows:

Three months ended March 31

Denominator for basic net income (loss) per share - weighted average shares

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

Denominator for diluted net income (loss) per share - weighted average shares

Bloomia Acquisition

On February 22, 2024, the Company completed the acquisition of a majority interest in Bloomia and its subsidiaries (the “Acquisition”).

The Acquisition was completed by the Company through its wholly owned subsidiaries, Tulp 24.1 and Tulipa Acquisitie Holding B.V.

(“Tulipa”), pursuant to an Agreement for the Sale and Purchase of Shares by and among Tulp 24.1, Tulipa, Botman Bloembollen B.V., W.F.

Jansen (“Jansen”), and H.J.

Strengers, and Lendway, as the Guarantor.

Jansen will continue to serve as chief executive officer of Bloomia following the Acquisition.

As a result of the Acquisition, Tulp 24.1 became the holder of 100% of the ownership interests of Bloomia.

The acquisition has been accounted for in accordance with ASC Topic 805, "Business Combinations", using the acquisition method of accounting.

Under the acquisition method of accounting, the total purchase price was allocated to the net identifiable tangible and intangible assets of Bloomia acquired, based on their fair values at the date of the acquisition.

The acquisition was funded through a combination of debt and cash on hand.

The total consideration transferred for the Bloomia acquisition was $ 53,360,000 .

Consideration comprised of $ 34,919,000 of cash paid, $ 15,451,000 of seller bridge loans in lieu of cash, and $ 2,990,000 of equity issued of Tulp 24.1 which is reflected as noncontrolling interest within these condensed consolidated financial statements.

Following the noncontrolling equity issued, the Company owns 81.4% of Tulp 24.1 and the CEO of Bloomia owns the remaining 18.6%.

Refer to Note 9 for further discussion on the debt used to finance the Acquisition.

Provisional fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods as information necessary to complete the fair value analysis is obtained.

The fair value measurements associated with working capital and the allocation of certain intangible assets are preliminary as of the date these financial statements are available to be issued.

We expect to finalize the valuation and complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:

Fair value of purchase consideration

Cash consideration

Equity in subsidiary issued (noncontrolling interest)

Seller bridge loans

Total fair value of consideration

Fair value of assets acquired and liabilities assumed:

Cash and cash equivalents

Accounts receivable

Prepaid and other

Property and equipment

Intangible assets

Equity method investment

Finance lease - right of use assets

Operating lease - right of use assets

Total assets acquired

Accounts payable

Accrued expenses

Finance lease liabilities - current

Operating lease liabilities - current

Finance lease liabilities - long-term

Operating lease liabilities - long-term

Deferred tax liabilities

Total liabilities assumed

Net identifiable assets acquired

Total consideration transferred

The goodwill recognized is primarily attributable to the growth potential of the Company and is not deductible for tax purposes.

The fair value of customer relationships was estimated using a discounted present value income approach.

Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset.

Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return.

The fair value of the trade names was estimated using an income approach, specifically known as the relief from royalty method.

The relief from royalty method is based on the hypothetical royalty stream that would be received if the Company were to license the trade name and was based on expected revenues.

The useful life of the customer relationships was determined considering the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of the customer relationships.

The issued equity of the subsidiary, now reflected as noncontrolling interest was valued considering the total value of the acquired company and comparing that to the rollover value of the shares being converted.

Revenue, net and net income for Bloomia since the date of acquisition included in the condensed consolidated statement of operations for three months ended March 31, 2024 were approximately $ 8,033,000 and $ 1,091,000 , respectively.

Unaudited pro forma information has been prepared as if the acquisition had taken place on January 1, 2023.

The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction actually taken place on January 1, 2023, and the unaudited pro forma information does not purport to be indicative of future financial operating results.

The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisitions.

In accordance with ASC 250-10, the Company is unable to provide unaudited pro forma information for revenue and net earnings for the three months ended March 31, 2023 due to lack of available information during the period prior to ownership.

Unaudited pro forma information for the three months ended March 31, 2024 is as follows:

The Company incurred approximately $ 1,542,000 of acquisition-related costs that were expensed during the three months ended March 31, 2024.

These costs are included in sales, general and administrative expenses in the condensed consolidated statements of operations.

Sale of In-Store Marketing Business and Presentation as Discontinued Operations.

2 unchanged sentences

The Company retained accounts receivable, as well as cash, cash equivalents and marketable securities.

The cash consideration for the sale was subject to a post-closing adjustment depending on the net balance of (i) cash received by the Company for programs that remained unexecuted as of August 3, 2023, minus (ii) the payments made by the Company to vendors for unexecuted programs.

The cash consideration for the sale was subject to a post-closing adjustment.

The final purchase adjustment for the net balance was to reduce the cash consideration by $ 1.5 million, with the Company retaining an equal amount of cash that had been received for unexecuted programs.

Under the Purchase Agreement, $ 200,000 was escrowed for a twelve-month period for any future claims, as defined in the Purchase Agreement, by the Buyer against the Company.

Lendway, Inc.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The gain on sale of the In-Store Marketing Business before income taxes was determined as follows:

Carrying value of assets sold, less liablities

Transaction costs not previously expensed

Gain on sale of In-Store Marketing Business

The Company incurred transaction-related severance and other separation benefits in connection with the termination of certain officers and employees of the discontinued operations of approximately $ 490,000 , as well as retention award payouts totaling $ 343,000 , of which $ 48,000 was included in continuing operations, and employee bonuses totaling $ 164,000 , each of which was recorded as expense in the three months ended September 30, 2023.

The results of the In-Store Marketing Business have been presented as discontinued operations and the related assets and liabilities have been classified as related to discontinued operations, for all periods presented.

The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the Condensed Consolidated Balance Sheet were as follows:

The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the Consolidated Balance Sheets were as follows:

Current Assets:

Accounts receivable

Prepaid production costs

Other prepaid expense

Accounts receivable, net

Current assets related to discontinued operations

Other Assets:

Property and equipment, net

Operating lease right-of-use assets

Non-current assets related to discontinued operations

Current Liabilities:

1 unchanged sentence

Accrued liabilities

Current portion of operating lease liabilities

Deferred revenue

Current liabilities related to discontinued operations

Long-Term Liabilities:

Operating lease liabilities

Non-current liabilities related to discontinued operations

Lendway, Inc.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Results of discontinued operations are summarized below:

Three Months Ended

Nine Months Ended

Three Months Ended March 31

Net services revenues

3 unchanged sentences

Total Operating Expenses

Gain from litigation settlement, net

Operating Income (Loss)

(Loss) income from discontinued operations before income taxes

Operating Income

Income from discontinued operations before income taxes

Income tax benefit

(Loss) income from discontinued operations, net of tax

Income from discontinued operations, net of tax

The Company collected the remaining accounts receivable from the discontinued operation in April 2024.

For the three months ended March 31, 2024, the Company recognized approximately $ 72,000 of benefit in sales, general and administrative expense of discontinued operations from the reduction in the accrual for sales tax due to the expiration of the statute of limitations.

Inventories at March 31, 2024 consisted of the following:

Finished goods

Work-in-process

Raw materials and packaging supplies

Total inventories

Property and Equipment.

Property and equipment at March 31, 2024 consisted of the following:

Machinery and equipment

Leasehold improvements

Furniture and fixtures

Property and equipment, gross

accumulated depreciation

Property and equipment, net

At March 31, 2024, property and equipment, net of $ 819,000 were located outside of the U.S.

Depreciation and amortization expense of property and equipment was $ 142,000 for the three months ended March 31, 2024, of which $ 122,000 and $ 20,000 were recorded within cost of sales and sales, general and administrative expenses, respectively.

As of March 31, 2023, total property and equipment, net was $ 35,000 and depreciation for the three months ended March 31, 2023 was $14,000 which was recorded in sales, general and administrative expenses.

Equity Method Investment.

Araucanía Flowers SA (“Araucania”) is based in Chile and serves as a marketing arm for the Company to export its crops to Latin-America countries.

Araucanía has two other shareholders that hold 70% of its aggregate issued and outstanding shares.

At March 31, 2024, the Company had a 30% equity interest in Araucania with a carrying amount of approximately $ 167,000 .

For the period ended March 31, 2024, the equity in net income of Araucania was approximately $nil.

As of March 31, 2024, the Company had a note receivable from Araucanía with a balance of $ 165,000 which is included in Prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet.

The Company had a 50% ownership interest in Horti-Group USA LLC (“Horti-Group”).

Horti-Group operates a 45-acre facility near Washington D.C.

that the Company utilizes to grow and distribute its tulips to North American customers.

On February 9, 2023, the Company sold its interest in Horti-Group to V-Maxx for a sale price of $ 2,500,000 .

The sale price was seller-financed via the issuance of an interest-free loan from Fresh Tulips to V-Maxx with an original principal amount $ 2,500,000 .

The loan to V-Maxx is to be repaid in 17 monthly instalments of $150,000 for the first 16 months and $100,000 for the last month, with the first payment on April 1, 2023 and the last payment on August 1, 2024.

At March 31, 2024, the balance of the loan was $ 700,000 .

Goodwill and Other Intangible Assets.

The following table summarizes the changes in goodwill:

Balance as of January 1, 2024

Goodwill resulting from the Bloomia Acquisition

Balance as of March 31, 2024

Other intangible assets and related amortization are as follows at March 31, 2024:

Cross Carrying Amount

Useful Life (Years)

Accumulated Amortization

Net Carrying Amount

Customer relationships

For the three months ended March 31, 2024 amortization of intangible assets expensed to operations was $ 158,000 .

The weighted average remaining amortization period for intangible assets as of March 31, 2024 approximately 11.9 years.

Remaining estimated aggregate annual amortization expense is as follows:

Remainder of 2024

The components of debt at March 31, 2024 consisted of the following:

Credit Agreement - term loan

Credit Agreement - revolving credit facility

Notes payable

unamortized debt issuance costs

Less current maturities

( 2,850,000 )

Gain from sale of discontinued operations before income taxes

Income tax expense

Gain from sale of discontinued operations, net of tax

The accounting policies for the discontinued In-Store Marketing Business, including for revenue recognition, are disclosed in the notes to financial statements included in the Company’s Annual Report on Form 10-K.

In July 2019, the Company filed suit against News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C.

(collectively, “News America”), alleging violations of federal and state antitrust and tort laws by News America.

On July 1, 2022, the Company entered into a $ 20 million settlement agreement with News America.

The agreement resulted in net proceeds before income tax of $ 12,000,000 for the Company, which was recorded as a gain on litigation settlement in the discontinued operations of the In-Store Marketing Business during the three months ended September 30, 2022.

For the three and nine months ended September 30, 2023, the Company recorded income tax expense on discontinued operations of $ 74,000 and $ 74,000 , respectively.

For the three and nine months ended September 30, 2022, the Company recorded income tax benefit from discontinued operations of $ 191,000 and $ 173,000 respectively.

The income tax benefit for 2022 included a decrease of approximately $ 678,000 in unrecognized tax benefits related to state exposure in the third quarter of 2022, which reduced accrued income taxes and increased the current tax benefit.

Lendway, Inc.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies.

Cash and Cash Equivalents and Restricted Cash.

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows:

September 30,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Subsequent to September 30, 2023 the restriction on the cash was released back to the Company, as it was related to a lease that transferred to the Buyer of the In-Store Marketing Business.

Stock-Based Compensation .

The Company measures and recognizes compensation expense for all stock-based payments at fair value.

Restricted stock units and awards are valued at the closing market price of the Company’s stock as of the date of the grant.

The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights.

The determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as by assumptions regarding a number of complex and subjective variables.

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

During the nine-month periods ended September 30, 2023 and 2022 no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors in August 2022.

In August 2022, non-employee members of the Board of Directors received restricted stock grants totaling 6,248 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”).

The shares underlying the awards were assigned a value of $ 9.60 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $ 60,000 .

The shares vested on July 26, 2023.

In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Equity Incentive Plan.

The shares underlying the awards were assigned a value of $ 8.16 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $ 45,000 .

The shares vested on June 1, 2022.

The Company estimated the fair value of stock-based awards granted during the three and nine months ended September 30, 2023, under the Company’s employee stock purchase plan using the following weighted average assumptions:

expected life of 1 .0 year, expected volatility of 95.2 %, dividend yield of 0 % and risk-free interest rate of 4.7 %.

Due to the sale of the In-Store Marketing Business, the plan year for the Company’s employee stock purchase plan was amended to end on July 31, 2023.

At July 31, 2023 participants purchased 338 shares.

During the three months ended September 30, 2023, the Company issued 22,382 shares of common stock in settlement of $ 148,000 of total deferred fees due to two non-employee director’s departure from the Board of Directors.

Total stock-based compensation expense recorded for the three and nine months ended September 30, 2023 was $ 7,000 and $ 43,000 , respectively, and for the three and nine months ended September 30, 2022 was $ 32,000 and $ 91,000 , respectively.

Net (Loss) Income per Share .

Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards.

Diluted net (loss) income per share gives effect to all dilutive potential common shares outstanding during the period.

In determining diluted net income (loss) per share, whether net income from continuing operations is positive or negative controls whether dilutive shares are included in the determination.

For all periods presented, net income from continuing operations is negative, a net loss.

Accordingly, since including dilutive shares would dilute the loss from continuing operations, no dilutive shares are included in any of the per share calculations.

Lendway, Inc.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Due to the net loss from continuing operations incurred during the three and nine months ended September 30, 2023 and 2022, all outstanding stock awards were considered anti-dilutive for those periods.

At September 30, 2022 and 2023 options to purchase 14,086 shares of common stock with a weighted average exercise price of $ 14.17 , were outstanding.

Weighted average common shares outstanding for the three and nine months ended September 30, 2023 and 2022 were as follows:

Long term debt, net of current maturities

To finance the Bloomia acquisition, the Company entered into a revolving credit and term loan agreement (the “Credit Agreement”), with Tulp 24.1 as the borrower (the “Borrower”) for a $ 18,000,000 term loan and a $ 6,000,000 revolving credit facility.

The revolving credit facility may be used by the Company for general business purposes and working capital, subject to availability under a borrowing base consisting of 80% of eligible accounts receivable and generally 50% of eligible inventory.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to Term SOFR for an interest period of one month plus 3.0%.

In addition to paying interest on the outstanding principal under the Credit Agreement, the Borrower is required to pay a commitment fee of 0.50% on the unutilized commitments under the revolving credit facility.

The obligations under the Credit Agreement are secured by substantially all of the personal property of the Borrower and its subsidiaries.

The Company provided an unsecured guaranty of the obligations of the Borrower under the Credit Agreement.

Commencing with the fiscal quarter ending on March 31, 2024, the Credit Agreement will require the Borrower and its subsidiaries to maintain (a) a minimum fixed charge coverage ratio of not less than 1.25 to 1.00 and (b) a maximum senior cash flow leverage ratio of 3.0 to 1.0 until September 30, 2024, stepping down to 2.00 to 1.00 on December 31, 2027, until the maturity date of the Credit Agreement.

As of March 31, 2024, the Company was in compliance with these financial covenants.

The Credit Agreement contains other customary affirmative and negative covenants, including covenants that restrict the ability of the Borrower and its subsidiaries to incur additional indebtedness, dispose of significant assets, make distributions or pay dividends, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions or grant liens on its assets, subject to certain limitations.

The Credit Agreement also contains customary events of default, the occurrence of which would permit the lenders to terminate their commitments and accelerate loans under the Credit Agreement, including failure to make payments under the credit facility, failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness of the Borrower or any of its subsidiaries, failure of the Borrower or any of its subsidiaries to pay or discharge material judgments, bankruptcy of the Borrower or any of its subsidiaries, and change of control of the Company.

The term loan is scheduled to be repaid in quarterly installments of $ 450,000 , commencing on June 30, 2024 with a scheduled maturity date of February 20, 2029 .

The term loan is subject to additional principal payments under the annual 50% of excess cash flow provision (waived if total net cash flow leverage is less than 2.0x as of fiscal year-end).

The scheduled maturity date of the revolving credit facility is February 20, 2029.

As part of the financing of the Bloomia acquisition, the Company entered into notes payable with the sellers.

Notes payable for $ 12,750,000 have a term of five years with a scheduled maturity date of March 24, 2029 .

The notes payable are subject to additional principal payments based on “excess cash flow” (“excess cash flow” has the same definition as “excess cash flow” used to determine additional principal payments for the term loan under the Credit Agreement).

The notes payable initially bear interest at 8 % per annum for the first year that increase annually by 2 percentage points.

Interest on loans made under the notes payable is payable “in kind” (“PIK”) Interest that is payable “in-kind” is added to the aggregate principal amount on the applicable interest payment date.

Additionally, the Company entered into short-term notes payable with the sellers.

The short-term notes payable for $ 2,700,000 had a term of nine calendar weeks after the closing date.

The short-term notes payable bear interest at 8 %.

These notes had an outstanding balance of $ 1,050,000 at March 31, 2024, and were paid in full after the end of the quarter during April 2024.

As of March 31, 2024, there was $ 375,000 of unamortized debt issuance costs related to the term loan, net of amortization of $ 10,000 which has been presented as a direct deduction from long-term debt in the accompanying consolidated balance sheet.

As of March 31, 2024, there was $ 126,000 of deferred financing costs related to the revolving credit facility, net of amortization of $ 3,000 , which has been presented within prepaid expenses and other current assets in the accompanying consolidated balance sheet.

The Company incurred $ 212,000 of interest expense on the term loans and revolving facility and incurred $ 125,000 on the seller notes which are included in other (income) expenses, net on the condensed consolidated statements of operations and comprehensive income (loss).

The combined aggregate amount of maturities for each of the five years following March 31, 2024, are as follows:

Remainder of 2024

The Company is party to leasing contracts in which the Company is the lessee.

These lease contracts are classified as either operating or finance leases.

The Company’s lease contracts include land, buildings, and equipment.

Remaining lease terms range from 1 to 15 years with various term extension options available.

The Company includes optional extension periods and early termination options in its lease term if it is reasonably likely that the Company will exercise an option to extend or terminate early.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term, at the later of the commencement date or business combination date.

Because most of the Company’s leases do not provide an implicit rate of return, the discount rate is based on the collateralized borrowing rate of the Company, on a portfolio basis.

The balances for operating and finance leases where the Company is the lessee are presented as follows within the condensed consolidated balance sheets:

Operating lease:

Operating lease right-of-use assets, net

Current portion of operating lease obligations

Operating lease obligations, net of current portion

Total operating lease liabilities

Finance lease:

Finance lease right-of-use assets, net

Current portion of finance lease obligations

Finance lease obligations, net of current portion

Total finance lease liabilities

The Company is party to an operating lease agreement with Horti-Group for land and greenhouses in King George, Virginia, United States.

The lease commenced on July 1, 2021 and, including a renewal option the Company expects to exercise, ends on December 31, 2038.

The Company recognized the following related party balances in the condensed consolidated balance sheets:

Operating lease right-of-use assets, net

Current portion of operating lease obligations

Operating lease obligations, net of current portion

Total operating lease liabilities

The components of lease expense are as follows within our condensed consolidated statements of operations and comprehensive income (loss):

Three Months Ended

Nine Months Ended

Denominator for basic net income (loss) per share - weighted average shares

Effect of dilutive securities:

Stock options and restricted stock units

Denominator for diluted net income (loss) per share - weighted average shares

Restructuring.

In connection with the change in the Company’s strategy to the Lending Business, the Company’s prior CEO, Kristine A.

Glancy, departed on August 31, 2023.

Included in general and administrative expense of continuing operations is expense of $ 926,000 relating to change of control and other severance related payments and benefits to Ms.

As of September 30, 2023, $ 650,000 remains to be paid to Ms.

Glancy and is included in accrued compensation .

At September 30, 2023, the Company has a month-to-month operating lease with a related party with monthly payments of $ 375 .

As part of the sale of the in-store marketing business, the headquarters lease was assigned to the Buyer as a part of the sale of the In-Store Marketing Business, and the other significant lease was terminated.

The amounts included in “Other” below relate to an office lease that was terminated effective September 30, 2023.

The cost components in continuing operations of the Company’s operating leases were as follows for the three and nine month periods ended September 30, 2023 and 2022:

Three months ended September 30

Nine months ended September 30

Related party lease

Operating lease expense:

Operating lease cost

Short-term and variable lease cost

Finance lease expense:

Amortization of leased assets

Total lease expense

The weighted average remaining lease term and weighted average discount rate is as follows:

Weighted average remaining lease term (years)

Finance leases

Operating leases

Weighted average discount rate applied

Finance leases

Operating leases

Supplemental cash flow information related to leases where the Company is the lessee is as follows:

Three Months Ended

Operating cash outflows from operating leases

Financing cash outflows from finance leases

Leased assets obtained in excha nge for operating lease liabilities

Leased assets obtained in exchange for finance lease liabilities

As of March 31, 2024, the maturities of the operating and finance lease liabilities are as follows:

Remainder of 2024

Total minimum lease payments

imputed interest

( 25,778,000 )

present value of lease liabilities

current portion

Long-term portion of lease liabilities

Income Taxes.

For the three and nine months ended September 30, 2023, the Company recorded income tax (benefit) of $( 11,000 ) and $( 4,000 ), respectively, or 0.6 % and 0.1 % of loss from continuing operations before taxes, respectively.

For the three and nine months ended September 30, 2022, the Company recorded income tax expense of $ 1,000 and $ 5,000 respectively, or ( 0.2 )% and ( 0.3 )% of loss from continuing operations before taxes, respectively.

The income tax expense (benefit) for the three and nine months ended September 30, 2023 and 2022 is comprised of federal and state taxes.

The Company reassesses its effective rate each reporting period and adjusts the annual effective rate if deemed necessary, based on projected annual income (loss).

The actual tax expense attributable to from continuing operations income before taxes differs from the expected tax expense computed by applying the U.S.

federal corporate income tax rate of 21 % as follows:

Lendway, Inc.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine months ended September 30,

Federal statutory rate

Stock-based awards

Impact of uncertain tax positions

Valuation allowance

Effective federal income tax rate

Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws.

In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income and available tax planning strategies.

If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment to the carrying value of deferred tax assets and liabilities may be required.

Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.

As of September 30, 2023, and December 31, 2022, the Company had unrecognized tax benefits totaling $ 41,000 and $ 53,000 , respectively, including interest, which relates to state nexus issues.

For the three months ended March 31, 2024, the Company recorded an income tax benefit of 20.6 % on loss from continuing operations.

The rate differs from the federal statutory rate of 21 % due to state taxes of 4.7 %, valuation allowance change of 17.6 % and nondeductible transaction costs and other permanent items of ( 22.7 )%.

For the three months ended March 31, 2023, the Company recorded an income tax expense of 0.2% on loss from continuing operations before income taxes.

The rate differs from the federal statutory rate of 21 % due to state taxes of 3.5 %, valuation allowance change of ( 22.6 )% and other permanent items of ( 1.7 )%.

For the three months ended March 31, 2024, the Company recorded an income tax benefit of $ 347,000 on the loss from continuing operations before income taxes.

The overall benefit of $ 347,000 includes a $ 451,000 benefit for the reversal of the valuation allowance on federal deferred tax assets.

During the quarter the Company established deferred tax liabilities related to the acquisition in the majority ownership of Bloomia.

The Company anticipates that the deferred tax liabilities will result in future taxable income that will allow for the realization of the federal deferred tax assets.

As of March 31, 2024, and December 31, 2023, the Company had unrecognized tax benefits totaling $ 42,000 , including interest, which relates to state nexus issues.

The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $42,000.

The Company recorded a decrease of $ 16,000 in unrecognized tax benefits related to state income tax exposure in the third quarter of 2023 which reduced accrued income taxes and increased income tax benefit.

At December 31, 2022, the Company had Federal net operating loss (NOL) to carry forward of approximately $ 2,900,000 .

As of September 30, 2023, the Company estimates remaining Federal NOL carryforwards to be approximately $ 1,390,000 .

Federal NOL utilization is limited to 80% of estimated taxable income.

The estimated NOL carry forward will be adjusted at year end for actual results.

Stock Repurchase Plan.

On August 28, 2023, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s common stock.

The plan allows the purchases to be made in the open market or in privately negotiated transactions.

The plan does not obligate the Company to repurchase any particular number of shares;

and may be suspended anytime at the Company’s discretion.

For the three months ended September 30, 2023 the Company repurchased 75,345 shares for $ 437,000 .

Legal Proceedings.

The Company is subject to various legal matters in the normal course of business.

The outcome of these matters is not expected to have a material effect on the Company’s financial position or results of operations.

Commitments and Contingencies.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Legal costs incurred in connection with loss contingencies are expensed as incurred.

In the ordinary course of the business, the Company is subject to periodic legal or administrative proceedings.

As of March 31, 2024, the Company was not involved in any material claims or legal actions which, in the opinion of management, the ultimate disposition would have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

Purchase Obligation.

On July 1, 2023 the Company entered into an obligation with a third-party to purchase 25% of their annual production of tulip bulbs through 2028 for $1,650,000 annually, totaling $8,000,000 over the duration of the agreement.

In addition, the Company entered into a separate agreement with the same party to supply tulips to that party over a three-year period for a total of $360,000.

The Company will be paid in three sums of $120,000 beginning on March 1, 2026, with the final payment to be received on March 1, 2028 .

Other than this obligation, the Company has not had any material service or supply agreements that obligate the Company to make payments to vendors for an extended period of time.

As of March 31, 2024, Bloomia had committed to purchase machinery up to a total amount of $ 458,000 .

Employee Benefit Plans .

The Company sponsors a Retirement Profit Sharing and Savings Plan under Section 401(k) of the Internal Revenue Code.

The plan allows employees of Lendway, Inc.

to defer up to 50 % of their wages, subject to Federal limitations, on a pre-tax basis through contributions to the plan.

During the three months ended March 31, 2024 and 2023, the Company’s expense from continuing operations for matching contributions was $ 3,000 and $ 3,000 , respectively.

For all Dutch employees, the Company participates in defined contribution pension plans with an independent insurance company.

Defined contributions are expensed in the year in which the related employee services are rendered.

The Company makes contributions on behalf of all Dutch employees of which $ 8,000 were made and expensed for the period ended March 31, 2024.

Segment Data.

With the Bloomia Acquisition that was completed on February 22, 2024, the Company has two operating and reportable segments:

Bloomia and Lending, both of which are described in note 1.

The Company's remaining activities are presented as “Corporate“.

The Company's Corporate activities consist of corporate transaction expenses, certain corporate fees and expenses, interest expense, and management compensation.

The following table presents summarized financial information concerning the Company’s reportable business segments and Other activities:

Three months ended March 31, 2024

Income (loss) from continuing operations before income taxes

( 2,449,000 )

( 1,683,000 )

$ 102,981,000

$ 106,824,000

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements